July 13, 2024

brokerforyou.comMortgage lenders have tightened standards recently. But consumers still have the potential to get approved for a bigger home loan than they can afford.

                A general rule of thumb is that no more than 28% of gross monthly income should go toward house-related debt (including taxes and insurance). Besides first mortgages, this includes home-equity loans, which allow people to take out a lump-sum loan against the house, and home equity lines of credit, which allow people to borrow against the house over time, taking out money when needed.

                A person who makes $ 5,000 a month before taxes, for example, wouldn’t want the monthly bill for house debt exceeding $1,400.

                Note that that 28% guideline has a caveat: Monthly debt payments for everything- house, credit cards, car loans, student loans, etc.- shouldn’t be above 36% of gross monthly income. So if you spend 28% of your monthly pay on house debt, you have only 8% left for the remainder of your debt payments. In the example of someone who earns $5,000 a month, 8% would come to $400. Many car payments are more than that.      Century 21 San Diego Realtor

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